The company’s mobile unit includes local, long distance, international and roaming calls through different tariff packages based on usage and monthly fees. Unlike most wireless carriers in the U.S., the company does not offer subsidized handset prices.

The company also negotiates contracts with other telecom service providers like China Unicom and China Telecom this space for calls to that may reach areas where China Mobile’s network may not reach.

Below we highlight three of the most important drivers for China Mobile’s business and some upside and downside scenarios based on these drivers.

China Mobile’s mobile market share in China: China Mobile is the largest telecom service provider in the world with around 69% market share in 2010. In comparison to this, its competitors, China Unicom has a 20% market share while China Telecom has the remaining 11%.

We currently forecast that the share of China Mobile in the mobile market in China will decline from the current levels, though the company will stay a market leader by our estimates. This is primarily because of the highly regulated environment of the Chinese telecom industry and the restructuring initiatives taken by the government. However, the company enjoys the advantages of a wide coverage area, economies of scale and also its brand value.

In a scenario where the company retains its existing level of market share there could be 18% upside to the Trefis price estimate.

2. Improved EBITDA margins (25%):

We currently forecast that the EBITDA margins of the company’s mobile voice and mobile phones division will continue to decline because of increasing competition in the Chinese telecom industry and tariff adjustments by the government. However, operating expenses have been growing at a lower rate owing to the large number of subscribers which in turn is driving down costs.